Indiana legislators talked about business taxes last week, while a new report gave a low rating to state taxes on ordinary citizens.
A “blue ribbon” commission on state tax policy heard an expert say Indiana’s tax burden on businesses is lower than in our neighboring states, and among the 10 lowest in the country.
That led influential state Sen. Luke Kenley, R-Noblesville, to declare that Indiana might not need any new business tax cuts in 2015.
Meanwhile, a tax advocacy group called WalletHub released its report titled “Most & Least Fair State Tax Systems.”
The group rated Indiana 45th out of 50 states in tax fairness.
Getting more specific, Indiana ranked as the state with the 6th most unfair taxes on the middle class and 7th most unfair taxes on poor people in the bottom 20 percent income bracket.
WalletHub clearly prefers a graduated state income tax, in which people with higher incomes pay higher tax rates. Most states and the federal government use that system.
Indiana ranks among a minority of states using a flat-rate income tax that is the same for all income brackets.
Back in Indianapolis, it appeared Kenley is not inclined to push for elimination of the property tax on business equipment. Such a move might shift even more of the tax burden to citizens.
The business equipment tax brings in $1 billion per year for local governments across the state. Last year, Gov. Mike Pence called for eliminating the tax to make Indiana more attractive to business.
When local government leaders put up a howl, legislators backed off and passed a watered-down law. It gives Indiana counties the power to decide on their own to drop business equipment taxes. So far, no counties seem eager to do so.
At Monday’s hearing, Fred Nicely of the Council on State Taxation praised Indiana’s business tax. However, he said the business equipment tax is one area that could improve.
“But we don’t advocate for complete elimination of taxes; we want a stable base,” Nicely reportedly said.
It’s always good to have the facts, and legislators learned that since 2007, the business share of property taxes has grown from about 51 percent to 57 percent. The reason: Legislators passed Indiana’s property tax caps, designed to help homeowners.
To balance that shift, lawmakers have approved several cuts to other business taxes, keeping Indiana’s rating attractive.
With business taxes in good shape, comparatively, “I think we need to look at the whole tax system for all taxpayers,” Kenley said last week.
Now that Indiana’s business taxes rank among the 10 most favorable, it would be nice to see taxes on citizens rated among the most fair, too.